Debt (I have a student loan)

If your financial issues cause you anxiety, depression or insomnia, deal with them as quickly as possible so they don't prevent you from getting your finances in order. Check solutions for anxiety, depression, and insomnia.

Make sure you even know how much you owe, to whom, and what is the interest rate of a certain loan, credit debt or anything else. When you have a clear picture of all your debts, it will be easier for you to decide your next step.

Assess all your income and expenses. Hopefully, you will have something left after you pay for food, rent, bills, and any other expenses you cannot avoid. Everything that's left should go to debt repayment. When you know how much money you can use every month to repay your debt, you will also know how long will it take you to get rid of it and when can you start repaying your other debts, if you have them. This is good for you to know. And for your creditors as well.

Managing a debt can be an overwhelming experience. Your whole lifestyle has to significantly change for the next several months, or even years. If you don't have a clear goal in mind, your discipline might not be strong enough to sustain those changes as long as needed.

Start with a small goal you can easily achieve. And then another. And another. And so on. This will give you a sense of progress. As your debt decreases, your confidence and happiness will increase.

You might think this doesn't need to be stated. But surprisingly, lots of people start paying off smallest debts first, regardless of the interest rate. They feel that a psychological effect of clearing your small debts in a short amount of time will help them stay on track with their debt management.

While this argument has a certain merit, you should not ignore the interest rate. You should not focus on your $500 dollar debt with 6% interest rate while your $10.000 debt with 10% interest rate keeps piling up interests. Always pay the one that has the highest interest rate, no matter how big or small it is.

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You got some money you didn't expect as a birthday gift, work bonus, tax return, etc. Don't squander it on something unnecessary. I know it's tempting to use it on something else since this money is not a part of your repayment plan, but remember that your goal is to get rid of your debt as soon as possible. So stay disciplined and use this money to reduce your debt.

If tackling your debt all on your own proves too difficult for you, you might want to try talking to a professional. A credit counselor can help you with managing your debt, setting up your budget, and providing you with various options. 

To find a respectable counseling agency, go to justice.gov.

Always take care of your credit score. No matter how bad your financial situation is, if possible, try not to do anything that will destroy your credit score. You will need it for managing your debt and for any loans and credits you might take in the future. For maintaining your credit score, check credit score solutions.

Debt consolidation means taking one big loan, with an interest rate as low as possible, to repay all your other loans. That way you could save lots of money due to lower interest rate and go from having to deal with several creditors, to dealing with only one creditor. Talk to you credit counselor to see if this is the best option for you.

Debt settlement is one of the last options for getting rid of your debt as it will seriously damage your credit score. But, sometimes it is the best option for you. Basically, your creditors and you agree that you will pay a certain percentage of your debt and it will count as if you repaid your entire debt.

Before using this option, talk to your credit counselor to see if this is the best option for you.

It's not the most pleasant thing to do, but it certainly beats getting a high-interest loan from a bank or credit card company. Explain your situation to your friends and family and if needed, make an official agreement, with notary public present, so the person who lends you the money knows you are serious about repaying your debt to them. If needed, offer a collateral.

While repaying your debts should be a priority, spare a certain amount (as much as you can) for your emergency fund. You never know when will you need it for medical bills or some other situation that requires lots of money right away. Otherwise, you will further increase your debt.

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Make sure that you understand what are you up against. Examine your rights and responsibilities as a loan user, available repayment options, factors that determine if you are eligible for forgiveness of a debt, consequences if you default on your payments, etc.

Realize that failing to repay your student loan will have terrible consequences on your credit score. And you need to have a great credit score for any future loans you might take.

 With a standard repayment plan, you will be able to pay off your entire student loan in 10 years. Every month you pay the same amount until your debt is fully repaid. Suitable for students with a steady income. One of the most efficient way to pay off your debt.

A graduated repayment plan starts with smaller monthly payments that increase over time. It's perfect for you if you current salary is too low for a standard repayment plan, but you expect to get periodic promotions and salary increase. With this plan, you will also be able to repay your student loan in 10 years.

This plan should only be used if you can't afford any other plan. Your monthly payments will be small, but overall, you will pay a much higher amount due to interest. With this plan, you expect to fully repay your student loan in 25 years.

Depending on your financial situation, you might be eligible for various income-based repayment plans.

• Revised Pay As You Earn Repayment Plan (REPAYE Plan)
• Pay As You Earn Repayment Plan (PAYE Plan)
• Income-Based Repayment Plan (IBR Plan)
• Income-Contingent Repayment Plan (ICR Plan)

For more info about those repayment plans, visit studentaid.ed.gov.

If your financial situation becomes so bad you are no longer able to repay your student loan, you might be eligible for deferment or a forbearance of your payment. However, know that your interest will still accumulate during this period so use this only if you have no other choice. But anything is better than defaulting on your payments.

To see whether you qualify for deferment of forbearance, visit studentaid.ed.gov

If at all possible, try to target the principal with extra money, along with your usual monthly payments. This will allow you to repay your debt sooner, and since you are paying off only principal and not the interest, it will make your payments more efficient and save ou money over time.

Talk to your loan servicer about this option.

Find out if you are eligible for a forgiveness of your student loan. For more information about this, visit studentaid.ed.gov.

It's a long shot, but depending on what firm you are working for, there might be some solutions to explore regarding your student loan. Some firms offer annual contributions for your debt repayment. Other might offer loans with low interest, or no interest at all. Talk to your employer to see if your firm can help in any way.

One of the many benefits of a government student loan is the wide array of repayment possibilities, deferment options, and in some cases, even forgiveness of your student loan. You lose all those perks if you consolidate with a private lender. So whatever you do, do not switch to a private lender in an attempt to clear your debt.